SEC Chairman Mary Schapiro’s decision Wednesday to cancel the vote
on money-market fund (MMF) regulation brought to a close months of tough debate. AFP has long opposed the reforms for the potentially harmful effects they could have on the MMF industry. As such, immediate reaction to the news by AFP members and staff were overwhelmingly positive.Jim Kaitz, AFP’s President and CEO:
“The potential disruption of $2.6 trillion of funding would likely have left corporate treasurers without a critical source of short-term capital, namely commercial paper. AFP will continue to monitor the situation in Washington, as we understand that the Financial Stability Oversight Council (FSOC) will continue to assess the role that money-market funds play in the global financial market.”Jim Gilligan, CTP, Assistant Treasurer, Great Plains Energy Inc., and AFP Board member:
“The abandonment of the vote on the proposed changes in MMF rules by the SEC is significant. It proves a majority of the commissioners are listening to corporate practitioners’ admonition that the rules as proposed would likely cause major unintended harmful consequences. Although additional conversation about regulation of money-market funds is still likely, I’m encouraged by this development and hope any future discussions are conducted on a more collaborative basis with participants.”Laura Fisher, Managing Director, Silicon Valley Treasury Consulting Group:
“The cancellation of the vote is good news for my corporate clients particularly at this time heading into year end and the expiration of unlimited FDIC insurance on non-interest-bearing checking accounts. Stability in the money-market funds will ease the transition for my clients as they look to transfer cash balances from these bank accounts to other operational cash investments.
“However, I have always encouraged my clients to exercise prudent risk management in selecting their cash and investing vehicles and that hasn’t changed with the cancellation of this vote. It is important to understand the risks and benefits of all investment alternatives, money funds included.”Jeff Jellison, CEO-North America, Institutional Cash Distributors:
“The corporate treasury community really came together to defend against unnecessary and damaging MMF regulations. The SEC should be very proud of the 2a-7 Amendments they put in place in 2010, and for not bowing to the Fed’s pressure to over-regulate the MMF industry. This is a major victory for our corporate clients who use MMFs for investing as well as for those who use MMFs for their short-term financing.
“We were surprised this debate lasted so long as overwhelming evidence pointed out that additional MMF regulation would hurt borrowers and investors and that the proposed reforms lacked congressional support. We are happy this finally came to a head so that most of the uncertainty is removed and corporate treasury can continue to count on MMFs as their preferred investment of choice for capital preservation, liquidity and yield.
“We still have the threat of the Financial Stability Oversight Committee deeming MMFs as systemically risky, which would cause problems for some fund families. However, we doubt this will happen as any FSOC action would be met with lawsuits bringing forth the same superior pro-MMF arguments.
“Findings from the 2012 AFP Liquidity Survey shows bank deposits now account for over 50 percent of short-term corporate investment balances. Over 400 banks failed in the past four years, while only two MMFs broke the buck in over 40 years. As such, we agree with Commissioner Aguilar that it is prudent to review the entire cash management industry.”